MP hits out at ‘targeted leaks’ on Rock’s future

Feb 14 2008 by Adrian Pearson, The Journal

VIRGIN Money and Northern Rock bosses are today going over their offers for the troubled bank as the Government urges both sides to improve their bids.

The Treasury is believed to favour the Virgin-led bid, but the consortium has been told to increase the offer made for the troubled bank.

BBC business editor Robert Peston, who broke the original story, has reported that the Government is looking again at nationalisation as it waits to see just how quickly it can recoup the £25bn loaned to North Rock.

But last night Newcastle Central MP Jim Cousins accused the BBC of allowing “targeted leaks” to threaten the bank’s future.

Mr Cousins, who sits on the Treasury select committee, said: “This particular journalist has become the leaker in chief for the British banking establishment.

“There are those in the banking industry who do not want to see a successful English bank based outside London and will do all they can to stop that.

But with these leaks, at crucial times, the City is making itself into a laughing stock. If we believed everything that they said about Northern Rock, we would think it was the zombie bank they describe it as.

“But what we know is that this is a very good bank that can get back on its feet.

“Someone is out to damage the bank and it must be terrible for the very loyal staff who work there.”

Mr Cousins added that talk of nationalisation was premature.

Despite the risk that the Government might scupper plans to sell the bank, one investor yesterday increased its stake in the bank.

Northern Rock’s biggest shareholder, Monaco-based hedge fund SRM Global, has upped its stake in Northern Rock from just under 10% to 11.5%. SRM is an opponent of the Virgin plans, which will see its consortium take a majority stake in the business.

Shares in the embattled bank fell 9.5p to 95.5p yesterday as they responded to reports that both rescue deals on the table failed to match up to Government expectations.

And although shareholders remain concerned over Virgin’s bid, the Treasury has maintained its insistence that investors may get no compensation at all if it is eventually forced to nationalise the firm.

A spokeswoman for Virgin Money said: “We will continue to work with the Treasury on this.”

A spokeswoman for Northern Rock described the in-house bid as a “work in progress”.

The BBC declined to comment.

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